Week Ahead & in Review:

Week in review: The European Commission Sentiment Indicator (ESI) edged down in April to 103.7, but remains 3 points above its long-term average, pointing to a moderate recovery. Among the largest countries, the indicator remained unchanged in Germany and in Italy, standing above their long-term averages, and rose in Spain. The decline in France took it further below its long-term average, suggesting that France is lagging its European peers in the recovery. In Portugal, the indicator jumped nearly 3 points to above its long-term average, while in Greece it fell again to 8 points below its long-term average and nearly 12 points below its local peak in june 2014.

In Portugal, the unemployment rate fell to 13.5% in March, a 0.1 p.p. decline relative to February. The unemployment rate has been hovering around these levels over the last few months, which slightly dampens expectations regarding GDP in Q1 2015. Nevertheless, other high frequency indicators suggest strong growth in Q1. The unemployment rate is higher than in the euro area, where it was 11.3% in March 2015, stable compared with February 2015, but down from 11.7% in March 2014. In a separate report, Eurostat has stated that among the 44.1 million persons in the European Union (EU) working part-time in 2014, 9.8 million were underemployed meaning they wished to work more hours and were available to do so. This corresponds to 22.2% of all part-time workers and 4.5% of total employment in the EU in 2014. The large majority of part-time workers being underemployed in the EU were women (67%). This data further adds to the employment gap, which suggests that wage pressures ar likely to remain muted in the coming months and even possibly years. In Portugal, the underemployed represented 5.5% of total employment, the 7th highest rate in the EU.

In the US, GDP was worse than expected, up 0.2%qoq annualised (consensus was for 1%). The reasons for this underperformance are related to temporary factors such as bad weather and port strikes, but also to the strength of the US dollar. As a result, markets now  expect a first hike to happen in September, rather than in June.

Week ahead: Important week for the US as non-fam payrolls (out on Friday) should provide more guidance about the strength of the recovery, after a weak Q1 GDP report.